Controlled flooding in Louisiana spawns new loan risk-detection tools

The controlled flood caused by the release of the Morganza Spillway north of Baton Rouge, La., forced one risk analytics firm to develop a service to determine which mortgages could lose value as a result. DataVerify responded within 48 hours of the announced flooding by enhancing its DRIVE risk-mitigation system to detect at-risk mortgages located in the flood zone. Shortly thereafter, the firm successfully pinpointed the existence of $70 million in pending loan applications located in at-risk areas. This gave mortgage originators enough time to stop funding of certain mortgages until the properties could be checked for damages and reappraised. A spokesman for DataVerify, which provides data integrity and fraud detection services for 600 originators, said many clients just want the data on mortgages impacted by the flood for planning purposes. In the end, DataVerify’s tool detected 369 pending mortgage applications located in flooded areas. Santa Ana, Calif.-based CoreLogic (CLGX) recently said the flood waters could put $2 billion worth of properties at risk. In addition, almost 21,300 homes are potentially inundated by water, CoreLogic said. “We designed the DRIVE decision engine with the flexibility to allow for this level of rapid customization,” said Kent Johnson, vice president of DataVerify. “Our customers need to be able to guard against potential losses that result from swiftly emerging risks such as natural disasters.” Write to Kerri Panchuk.